Export-Import Bank: Privatized Gains and Socialized Losses
By Eric Peterson
As Congress begins to wind down, the debate over whether to extend the life of the taxpayer-backed Export-Import Bank (Ex-Im) is continuing to heat up as its September 30th expiration date approaches. Much has been written over the costs and shortcomings of the beleaguered bank as well as its corporate welfare aspects. In fact, one notable politician called Ex-Im “little more than a fund for corporate welfare” – but that was before he was elected president. What has been less discussed, however, is that for every job the Ex-Im bank “supports “it destroys as many, if not more, American jobs.
Supporters of Ex-Im Bank only look at the visible benefits that allegedly come from the money given to exporting companies. What they fail to account for are the massive unseen costs of these taxpayer-supported loans and guarantees. For every dollar one company receives in financing, it is also receiving an unfair advantage over similar companies competing in the same industry who did not get Ex-Im funding. Having to compete with recipients of subsidies well-connected enough to receive Ex-Im handouts means those businesses that lack political connections are unable to expand, bring on additional hires and may even raise the specter of bankruptcy. While the beneficiaries such as the much touted Miss. Jenny’s Pickles gets plenty of spotlight both from politicians who back the bank and their friends in the media; those harmed by the banks policies often lack such high-profile spokesmen.
One such egregious example has been the nearly $700 million loan to Australia’s richest woman, Gina Rinehart, for the purchase of mining equipment for the new Roy Hill iron ore mine. While it’s certainly questionable as to why an Australian tycoon worth over $17 billion would need a loan from the American taxpayer to purchase this equipment, it is doubly so when it may costs hard working Americans their jobs. In a letter to Ex-Im chairman Fred Hochberg, Senators Franken (D-MN), Amy Klobuchar (D-MN), Carl Levin (D-MI) and Debbie Stabenow (D-MI) expressed their concern that this deal would harm the mining industry in their states. In their words, “It is estimated that, over the life of the financing, Roy Hill’s output would displace nearly $600 million of U.S. iron ore exports and would cause a reduction of approximately $1.2 billion in U.S. domestic sales, for the total loss to the iron ore industry of $1.8 billion.”
While it’s understandable why these lawmakers are upset about Ex-Im’s actions, they shouldn’t be surprised. By its very nature of giving subsidies to some companies and not others Ex-Im is bound to pick winners and losers. This one example of hard working American miners being hurt while Australian billionaires win is hardly the extent of the damage. It’s simply the tip of the iceberg. Delta Airlines, for example, has claimed to have shed up to 7,500 full time jobs because Ex-Im provides subsidies to foreign air carriers to purchase cheaper aircrafts. And these cases are hardly isolated. Diane Katz of the Heritage foundation has detailed other examples of Ex-Im’s distorting power, while many more go unseen.
However, these distortions don’t only affect large companies– they affect smaller ones as well, even in the same industry. For example, in New York’s, Ex-Im subsidizes the Allstate Apple Exchange to the tune of over half a million dollars. Meanwhile, Prospect Hill Orchards, another major apple producer, in another part of New York receives no funding – but still has to compete against Allstate. This gives Allstate an unfair, unearned and taxpayer-subsidized advantage over Prospect Hill. If this apples to apples comparison doesn’t make the point clear enough, perhaps the fact that while New York apple orchards receive funding, orange farmers in Florida aren’t so lucky and are among the losers in Ex-Im’s federal handout game.
It’s time the government stopped picking winners and losers, especially since the losers tend to be American small businesses. It’s time to end the Export-Import Bank.
Like this post? Chip in $5 to AFP.